Financial & Managerial Accounting
Financial & Managerial Accounting
18th Edition
ISBN: 9781259692406
Author: Jan Williams, Susan Haka, Mark S Bettner, Joseph V Carcello
Publisher: McGraw-Hill Education
Question
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Chapter 11, Problem 5AP

a.

To determine

Calculate the number of shares of preferred stock issued.

a.

Expert Solution
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Explanation of Solution

The number of shares of preferred stock issued:

Number of shares ofpreferred stock issued }=( Par value of all preferred stock outstandingPar value per share of preferred stock)=( $2,400,000$100)=24,000

Conclusion

Therefore, the number of shares of preferred stock issued is 24,000.

b.

To determine

Determine the total amount of the annual dividends paid to preferred stockholders.

b.

Expert Solution
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Explanation of Solution

The total amount of the annual dividends paid to preferred stockholders:

Total amount of the annual dividendspaid to preferred stockholders}=(Number of shares of preferred stock outstanding ×Dividend requirement per share of preferred stock)=(24,000×$7.50)=$180,000

Working note:

Calculate the amount of dividend per share of preferred stock:

Dividend per share of preferred stock }(Percentage of cumulative preferred stock× Par value per share)=(712%×$100)=(0.075×$100)=$7.5

Conclusion

Therefore, the total amount of the annual dividends paid to preferred stockholders is $180,000.

c.

To determine

Calculate the number of shares of common stock outstanding.

c.

Expert Solution
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Explanation of Solution

The number of shares of common stock outstanding:

Number of shares of common stock outstanding }=( Par value of all common stock outstandingPar value per share of common stock)=( $900,000$2)=450,000

Conclusion

Therefore, the number of shares of common stock outstanding is 450,000.

d.

To determine

Determine the average issuance price per share of common stock.

d.

Expert Solution
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Explanation of Solution

The average issuance price per share of common stock:

Average issuance price per share of common stock}=(Total issuance price of all common stockNumber of shares of common stock issued )=($9,225,000450,000 )=$20.50

Working note:

Calculate the total issuance price of all common stock:

Total issuance price of all common stock}(Par value of all common stock issued + Paid-in capital in excess of par common stock)=($900,000+$8,325,000)=$9,225,000

Conclusion

Therefore, the average issuance price per share of common stock is $20.50.

e.

To determine

Calculate the amount of legal capital.

e.

Expert Solution
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Explanation of Solution

The amount of legal capital:

Amount of legal capital=(Par value of preferred stock + Par value of common stock )=($2,400,000 + $900,000 )=$3,300,000

Conclusion

Therefore, the amount of legal capital is $3,300,000.

f.

To determine

Calculate the total amount of paid-in capital.

f.

Expert Solution
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Explanation of Solution

The total amount of paid-in capital:

Total amount of paid-in capital=(Total legal capital+ Additional paid-in capital of common stock )=($3,300,000+$8,325,000)=$11,625,000

Conclusion

Therefore, the total amount of paid-in capital is $11,625,000.

g.

To determine

Calculate the book value per share of common stock.

g.

Expert Solution
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Explanation of Solution

The book value per share of common stock:

Book value per share of common stock}=(Equity of common stockholdersNumber of shares of common stock outstanding )=($11,820,000450,000 )=$26.27

Working notes:

Calculate the par value of preferred stock:

Par value of preferred stock}(Number of preferred stock issued ×Par value per share)=(24,000×$100)=$2,400,000

Calculate the amount of equity of common stockholders:

Equity of common stockholders = (Total stockholders' equity Par value of preferred stock)=($14,220,000$2,400,000)=$11,820,000

Conclusion

Therefore, the book value per share of common stock is $26.27.

h.

To determine

Calculate the dividend per share of common stock.

h.

Expert Solution
Check Mark

Explanation of Solution

The dividend per share of common stock:

Dividend per share of common stock=(Total dividends on common stockNumber of common shares outstanding)=($1,912,500450,000)=$4.25

Working note:

Calculate the total dividends on common stock:

ParticularsAmount ($)
Beginning balance of retained earnings717,500
Add: Net income3,970,000
Subtotal4,687,500
Less: Retained earnings at the end of year(2,595,000)
           Dividends on preferred stock(180,000)
Total dividends on common stock$1,912,500

Table (1)

Conclusion

Therefore, the dividend per share of common stock is $4.25.

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Chapter 11 Solutions

Financial & Managerial Accounting

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